On July 14, IBM had the worst day in its history. Its stock fell about 25 percent and roughly $69 billion in value vanished in a single session — a steeper one-day drop than even the crash of 1987. The surprise was the reason. IBM was not brought low because artificial intelligence is faltering. It was brought low because AI is booming.
In an unusual letter to investors, chief executive Arvind Krishna explained that in the final weeks of June, IBM’s corporate clients abruptly rerouted their technology budgets. Money that would have gone to IBM’s software and services was redirected toward hardware instead — servers, storage, and the memory chips that AI systems devour — as companies scrambled to lock in scarce supply before prices climbed. Deals that were expected to close simply didn’t.
It was a glimpse of who pays for the AI gold rush. The same spending that has enriched chipmakers is quietly draining the budgets of the software companies that once seemed untouchable. On the day IBM fell, software stocks broadly slid while, tellingly, hardware and chip names held up.
It was not even the first blow. Months earlier, IBM’s stock had slumped when the AI company Anthropic unveiled a tool to modernize COBOL — the aging mainframe language that much of IBM’s business still quietly runs on.
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